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Tag: Cainiao Network

  • Alibaba to thank New Retail for Its record sales

    Alibaba to thank New Retail for Its record sales

    Continuing momentum in Alibaba Group’s New Retail business helped drive a 56 per cent year-on-year growth in sales for the quarter to December 31.

    The performance of the New Retail category – which combines its online (non-marketplace) and fast-growing offline retail businesses, including investments in Sun Art Retail and other established businesses – was a core highlight of the quarter, according to CEO Daniel Zhang.

    “Alibaba had another great quarter driven by the continued strength of the Chinese consumer and the wide and innovative range of services we provide for merchants and consumers,” he said.

    “We are excited by the continued momentum in New Retail, which came to life during another record-breaking 11.11 Global Shopping Festival. We expanded the scale and footprint of our New Retail initiatives with the vision of delivering true convergence of the online and offline consumer experience through mobile and enterprise technology.”

    Maggie Wu, CFO, said the group’s core business generated significant free cash flow of US$7.1 billion during the quarter, “enabling us to invest in New Retail, cloud computing, digital entertainment and globalisation”.

    Revenue from core online commerce (marketplace) activities rose 57 per cent to US$11.257 billion and from cloud computing by 104 per cent to $553 million. Digital media and entertainment sales rose 33 per cent to $832 million.

    The number of annual active consumers on Alibaba Group’s China retail marketplaces reached 515 million, an increase of 27 million from the year to September 30.

    Net income was $3.586 billion with operating margin was 31 per cent and adjusted EBITA margin for the core e-commerce business 53 per cent.

    Group highlights

    Alibaba summarised group highlights in its earnings statement, including:

    Taobao: Artificial Intelligence (AI) drove user engagement, with the Taobao app’s intelligent personal recommendations and innovative content formats continuing to drive strong growth in user engagement, conversion and annual active consumers. “We continue to invest in machine learning technologies which we apply to use cases that match consumer intent and product selection to deliver the best consumer experience.”

    Tmall: Tmall recorded 43 per cent year-on-year growth in physical goods GMV during the quarter, reflecting robust growth across all major categories including apparel and accessories, consumer electronics (mobile phones) and FMCG. “Tmall continues to be the platform of choice for the world’s top brands, with Givenchy, Giorgio Armani Beauty and Volvo establishing Tmall flagship stores and Longines, Hennessy, Dom Perignon and Baccarat joining our Luxury Pavilion in this quarter.”

    11.11: Last year’s annual November 11 Global Shopping Festival exceeded the previous year’s records, with GMV settled through Alipay on Alibaba’s marketplaces up 39 per cent year-on-year to $25.9 billion. “The continuous success of this record-breaking event is enabled by our resilient and scalable technology, as well as payments and logistics infrastructure that is capable of operating at massive scale.”

    New Retail: Rapid expansion through partnerships and innovative technologies included the opening of five new Hema fresh grocery stores in Shanghai, Beijing, Ningbo and Suzhou, taking the network to 25 at year end. “Hema exemplifies the convergence of online and offline retail by leveraging our in-store proprietary technology, digitised supply chain system, consumer insights and mobile ecosystem to provide a seamless experience for consumers.”

    In November, Alibaba formed a strategic alliance with Sun Art Group, the leading hypermarket and supermarket chain by revenue in China with over 440 stores nationwide. “Through this partnership, we aim to equip traditional retailers with our proprietary technology and know-how in online offline convergence to implement their digital transformation. In addition, the partnership with Sun Art will also enable us to accelerate the expansion of our New Retail offerings with national scale.

    International:  Alibaba’s cross-border and international retail businesses continue to show strong growth. Revenue from international commerce retail business reached $727 million in the, representing 93 per cent year-on-year growth, driven by its Southeast Asian platform Lazada and its global retail marketplace AliExpress. “While the markets for Southeast Asia and cross-border commerce remain very competitive, they are in the early innings of the game. We are optimistic about the long-term secular growth prospects of our international markets and will therefore continue to make significant investments for market share growth and focusing on the best customer experience.”

    Cainiao Network: Alibaba’s logistics division, Cainiao Network, processed 812 million orders during the 11.11 event. Cainiao Network operates an electronic shipping label system that standardises shipping data into structured formats, which enables efficient pick-and-pack operations for merchants and sorting and routing operations for delivery partners. “The advantages of this system have resulted in broad adoption by merchants and logistics service providers, both on and off our platforms, putting us in position to serve the growing consumption economy in China and roll out our New Retail strategy.”

    Cloud Computing:  Cloud computing revenue grew 104 per cent year-over-year to $553 million, driven by both robust growth in paying customers and revenue mix toward higher value-add product.  “In the December quarter, Alibaba Cloud launched 396 new products and features and continued to introduce proprietary AI technologies to tackle real-world challenges, such as traffic planning and optimising efficiency in manufacturing and airport operations. Alibaba Cloud continues to expand its customer base across a variety of industries.”

    Alibaba Cloud customers include Watsons China, carmaker Geely, and Beijing Capital International Airport.

    Digital Media and Entertainment: During the quarter, Youku video’s daily average subscribers more than doubled year-on-year, driven by several original drama series and shows that became popular hits with users.

    AI and innovation: Alibaba says its AI-powered voice assistant, Tmall Genie, surpassed 1 million unit sales since its official launch in July and the end of the year. “Tmall Genie is supported by a growing collection of sales and services and is an effective vehicle for offering a comprehensive set of every-day living applications within the Alibaba ecosystem,” the company said.

    In January, Alibaba’s Institute of Data Science Technologies (iDST), its AI research arm, developed a deep-learning neural network for natural language processing that scored higher than humans on a Stanford reading-comprehension test, the first time a machine has outperformed humans on such a test. “This development underscores Alibaba’s commitment to technology research which we believe builds the foundation for our growth in the long run.”

    Ant Financial: Alibaba Group agreed to take a 33 per cent equity stake in Ant Financial that will strengthen its strategic relationship pursuant to the series of agreements reached with Ant Financial in 2014. “We believe deepening our relationship through an equity stake in Ant Financial will bring key strategic benefits to us, including advancing our New Retail strategy with mobile payments, increasing user acquisition and retention through collaboration with the Alipay digital wallet (Alipay Wallet), and enhancing the execution of our international expansion.”

    The number of Alipay Wallet’s daily active users more than doubled during the quarter on a year-on-year basis.

  • Alibaba’s Hema supermarket chain to open more stores

    Alibaba’s Hema supermarket chain to open more stores

    Alibaba’s Hema supermarket says it will open three stores in the Chinese city of Xian by the end of this year.

    The offline supermarket’s expansion into the northwestern Chinese city follows an announcement that it will add 30 locations in Beijing by year-end, rapidly expanding its store count in the capital to 35 from the current five.

    The Beijing and Xian expansion, together, more than doubles Hema’s presence – currently 26 stores in seven Chinese cities, including 14 in Shanghai, five in Beijing, two in Ningpo, two in Hangzhou, and one each in Shenzhen, Suzhou and the Southwest city of Guiyang.

    Launched in March 2015, the ‘new retail’-driven supermarket is the purest manifestation of Alibaba’s ambitions to marry online with offline, offering consumers a “more-efficient and flexible” shopping experience.

    It starts with a mobile app that allows for researching of products while consumers browse the store. All payments are handled through Alipay, the mobile-payments platform owned by Alibaba’s related company Ant Financial. To improve consumers’ experience, the data collected from transactions is used to personalise recommendations, while geographic data helps to plan the most efficient delivery routes. Residents living within a 3km radius of a Hema store can have their groceries delivered to their doors as quickly as 30 minutes after ordering.

    Government partnership

    Expanding Alibaba’s Hema supermarket in Xian is part of a series of pacts Alibaba Group signed with the city government on Tuesday, including a memorandum of understanding for Alibaba’s new Silk Road headquarters, which the company will build in the city in the next few years. The two parties signed a total of 11 strategic partnership agreements spanning cloud computing, smart logistics, New Retail and financial services.

    Tianhua Zhong, vice president of Alibaba Group, said the partnership with the city government has been progressing smoothly since talks began last summer, adding that the next stage of collaboration will focus on five areas: e-commerce and new retail, City Brain projects, accessible financial services, smart logistics and culture and entertainment.al

    In addition to being the historic gateway to the Silk Road, “Xian is an important part of the ‘Belt and Road’ initiative, and building our Silk Road headquarters [in the city] will help to expand Alibaba’s reach in the midwest, in addition to economic zones along the [modern-day] Silk Road,” added Zhong.

    The Belt and Road Initiative, announced by Chinese President Xi Jinping in 2013, is an ambitious, US$90-billion infrastructure project to connect Asia, the Middle East, Europe, and Africa through global trade.

    Earlier this year, Xian became the first city in China to have its entire subway system accept mobile payments via Alipay – passengers can pass through subway gates simply by scanning a QR code. Upcoming collaboration projects with Ant Financial, Alibaba’s related company and operator of Alipay, include allowing cabs throughout the city to receive payments using the digital wallet, as well as providing accessible credit and financing options to the thousands of small and midsized businesses based in Xian.

    “With this agreement, Cainiao will work with Xian City to build a smart logistics hub for the northwestern region, which would serve the needs of the Belt and Road Initiative. Delivery speed in the midwest has a chance of becoming on par with eastern regions,” said Zhong.

    Alibaba’s logistics arm, Cainiao Network, is expected to invest RMB1 billion in the logistics hub, which would house the unit’s cutting-edge technologies such as automated production lines, AGV robots and robotic arms. Constructions are slated to begin this year and to be put into use before the 11.11 Global Shopping Festival comes around in 2019.

  • China’s new cross-border e-commerce rules explained

    China’s new cross-border e-commerce rules explained

    The Chinese government has issued updated guidance on rules for cross-border e-commerce in the world’s second-largest economy, giving stakeholders much-needed clarity on potential changes in policy that have hung over the sector for the past year.

    China’s Ministry of Commerce said in a statement on March 17 that overseas goods purchased online and distributed through bonded warehouses would continue to receive some preferential treatment, avoiding quarantine and quality checks that could have brought the import of many popular foreign products to a halt.

    “We believe this policy move injects confidence into China’s [cross-border e-commerce] industry as it demonstrates the authorities’ determination to provide regulatory clarity and spur growth for the industry,” Fung Global Retail & Technology MD Deborah Weinswig said in an email.

    Dennis Zhang, CEO of Los Angeles-based e-commerce service provider Voyage One, agreed, saying, “It gives everybody, including our clients, peace of mind to let them know that this is something the Chinese government continues to support.”

    Pilot program refined

    Last April, Beijing announced changes to a pilot program meant to bolster Chinese consumers’ ability to buy online directly from overseas merchants via cross-border e-commerce. At the centre of the program are bonded warehouses, where international brands shipped merchandise for sale to Chinese consumers without being subject to normal import duties or rules for quarantine and quality checks on goods such as food, cosmetics and health supplements. The proposed changes would have increased the tariffs paid on that merchandise and removed the preferential regulatory treatment. This caused significant upset among international brands because some of the most popular foreign goods purchased online – the food, health supplements and cosmetics – are also the most tightly regulated by Chinese authorities.

    According to reports, cross-border e-commerce orders plummeted as much as 60 per cent in major trading hubs such as Shenzhen, Zhengzhou, Ningbo and Hangzhou a week after the announcement. A month later, apparently in response to industry concerns, regulators said they would suspend the rollout of the new quarantine and quality check restrictions until the end of this year while leaving in place the higher import tax. In its March 17 announcement, regulators extended that suspension indefinitely, saying that all goods shipped through bonded warehouses would be considered “personal items” and therefore exempt from the stricter regulations.

    The government said it might issue further guidance on cross-border e-commerce before the current rules are formalised on January 1, but the announcement at least gives stakeholders a longer runway with which to prepare for any potential changes.

    “Everything is pretty much business as usual for the rest of this year,” said Ron Wardle, the Shanghai-based China CEO of Export Now, a company that helps retailers sell online in China.

    For Alibaba, by far China’s largest e-commerce player, the news means that the online purchase of overseas goods will continue unabated, with marketing research firm eMarketer predicting the sector will reach $157.7 billion by 2020 from about $86 billion last year.

    Pumping water into pools to raise fish

    Cheng Ouyang, a director at Alibaba’s Cross-Border E-Commerce Research Center, called the announcement a “positive signal” for the sector. Using a popular Chinese idiom to describe the new announcement, Ouyang said the government was “pumping water into pools to raise fish,” which means that Beijing is allowing space for cross-border e-commerce to grow. At the same time, the government will continue to fine-tune its regulations for the sector, while stakeholders are able to take advantage of a burgeoning sales channel for foreign goods.

    Part of the ministry’s announcement also included the addition of five more pilot zones, or testing areas for bonded warehouses, in Dalian, Hefei, Chengdu, Qingdao and Suzhou, bringing the total number to 15. Wardle said the additional zones would allow for faster delivery and reduced shipping costs, “which is great for consumers”.

    Alibaba’s logistics affiliate Cainiao Network said it welcomed the news. “We already have a strong network and will work closely with our partners in the newly announced pilot zones to continuously provide seamless cross-border logistics service and better serve both merchants and consumers,” said James Zhao, director of import logistics at Cainiao.

    While the government’s statement has lent stability to the sector for the moment, Fung Global’s Weinswig said there was still no guarantee about what updates to the policy may look like if they are indeed issued later this year.

    “There are still some unanswered questions,” she said. “Will there be some imports that do not fall within personal items? Is registration for imports required which would slow down [cross-border e-commerce] imports?”

    Wardle, meanwhile, expects that any updates to policy will be a hybrid of those already in place along with recommendations from major players in cross-border e-commerce, such as Alibaba’s cross-border shopping site Tmall Global. Any such model “would benefit both consumers and brands,” he said.

    Whatever the changes, Wardle said he doubts that regulators will backtrack on the progress that has been made in China’s cross-border e-commerce sector. Stakeholders have already made significant investments in infrastructure and resources, while consumers have come to expect access to foreign goods they can’t otherwise get.

    “The floodgates are already open,” he said. “That’s going to be hard to pull everything back.”